Hospitality closures reach an apex– is the industry on its last legs?

In light of recent research findings shedding light on the challenges faced by the hospitality industry, it is clear to see that the industry is facing monumental challenges in 2024. The data released on January 30th by CGA, NIQ and AlixPartners, reflects the tumultuous journey the hospitality industry has endured since the onset of the pandemic. The findings report that over 6,000 venues shuttered their doors in 2023 alone, making the total closures tally since the pandemic’s onset now nearing a staggering 23,000. Moreover, this sobering statistic is coupled with a disheartening trend of diminishing new openings for the third consecutive year, with just under 12,000 new venues emerging since 2020. These insights emphasise the intense pressures faced by on-trade establishments grappling with the ‘cost-of-doing-business’ crisis.
Further exacerbating the industry’s woes, the closure of restaurants across Britain has reached an unprecedented quarterly high, with over 500 venues ceasing operations in the final quarter of 2023. The data, obtained under the Freedom of Information Act by accountancy firm Price Bailey, reveals a concerning trend of increasing insolvencies, with 1,932 restaurants succumbing to financial distress throughout 2023. This equates to an average of more than five closures per day, marking a significant increase from previous years and signalling a sector in distress.
Furthermore following a lacklustre budget announcement in March 2024, which ignored the pleas from industry leaders for a reduction in the 20% headline rate of hospitality and tourism VAT, despite a long-running campaign from trade bodies and business owners which gained support in Parliament with more than 40 MPs calling for greater support for hospitality.
Reflecting on these developments, Jack Lander, the co-founder and Director of Pizzarova, a unique and independent pizza group, situated in the city of Bristol, provides his insight:

1. Reflecting on the latest reports indicating over 6,000 closures in the hospitality sector in 2023, what factors do you believe have contributed most significantly to this trend?

I think it has been a potentially deadly combination of several factors including reduced excess spending in average households, consistently high or increasing costs of goods and labour, together with evolving consumer expectations of ‘value for money’ during a cost-of-living crisis.

To navigate these challenges businesses have had to think outside the box to diversify or innovate their menus, service style and pricing. Unfortunately, some businesses have been slower to act and others have made hasty bad decisions, that compromise their values whilst trying to meet customer expectations. Ultimately, I believe these factors have added to the increase in hospitality closures.

2. How do you perceive the impact of the ongoing pandemic on the stability and growth of businesses within the food and drink industry?

There are some success stories within the industry, and those who have been quick to react have generally given themselves more breathing space and the freedom to keep adjusting to find the equation for success. However, the volatility in the market makes it difficult for businesses to have the confidence to push on, grow, and extend their liabilities when things could easily swing back the other way.

For instance, the work from home flexi approach is creating a great demand in office catering, with companies investing thousands in perks to get people back to the office and be more productive. But subtle changes in HR and company stance as the pandemic becomes an increasingly distant memory could change this landscape.

3. The figures suggest a decrease in new venue openings for the third consecutive year. What challenges do you think potential investors or entrepreneurs face in initiating new ventures in the current climate?
Raising funds can be a daunting task, especially in today’s challenging business landscape. With competition from established businesses that have better access to credit and a larger customer base, it’s no wonder that entrepreneurs are hesitant to invest.

However, I am eager to work with entrepreneurs to help them navigate the challenges of starting a small food business. Building the right team and developing a solid concept is crucial for success, particularly in the early days of the business. By doing so, the likelihood of securing funding and succeeding in the long run is greatly increased, and the risk of making costly mistakes in the first few months is reduced.

4. What can restaurant owners do to help navigate these challenging times?

Food businesses often face challenges in controlling their costs. They are often cash-poor and do not have the advantage of ticket sales or taking deposits in advance. Instead, they have to rely on credit from suppliers, which makes it essential to keep a close eye on their finances. To achieve this, we generate a profit and loss statement every Monday for the previous seven days to stay in control of our numbers.
When it comes to the future of the food and drink industry, we can expect to see more exotic cuisines making their way onto the scene. Customers are becoming increasingly interested in trying something ‘new’. However, quality will remain a critical factor, and we anticipate a shift towards customers willing to pay slightly higher prices for greater quality products. This trend may mean customers spend less overall, but they will focus on single transactions of higher value rather than multiple purchases of lower quality.

5. What do you make of the latest budget announcements and what impact will they have in supporting the hospitality industry?

I always think there is more the government could do to support the industry, I believe a thriving hospitality sector is key to creating a well balanced and thriving economy, not just profiting from one. I’m not sure a VAT reduction is realistic based on the success that has had so far but I think more growth investment initiatives is key to keep businesses pushing forward, recruiting people back into work, keeping small suppliers going and keeping money within local communities, not in the pockets of big corporates.

6. Given the increasing pressures faced by on-trade establishments, what innovations or adaptations do you think are necessary for businesses to thrive in the current market conditions?

The use of technology to enhance customer and team experience will be crucial. With advancements happening rapidly and new opportunities emerging every day, there are bound to be cost-saving efficiencies for businesses. Moreover, implementing technology can help to focus on key people areas which technology cannot replace in the hospitality industry. There are still a few businesses that are not properly equipped for takeaway and delivery, which is a fundamental aspect of any modern food business. Unless a business is operating at a Michelin Star level, everyone should be taking advantage of this opportunity.

Jack Lander, Founder and Director of Pizzarova,

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